The U.S. Court of Appeals for the Ninth Circuit has applied U.S. trademark law (the Lanham Act) to the activities of a Canadian citizen operating a business in Vancouver. The court acknowledged that it was applying the Lanham Act extraterritorially, but ruled that it was justified in doing so on the facts of the case.

The extraterritorial application of trademark law is unusual. Registered trademarks are valid only in the country of registration. A Canadian who uses trademarks in Canada could normally only infringe another party's trademark rights if those rights have been acquired through registration or use in Canada. Countries normally get to decide which marks receive protection within their own borders, and a judgment from a foreign court would not be enforceable in Canada without a Canadian court’s approval. The decision in Trader Joe’s Company v. Hallatt, which applies U.S. law to U.S. registered trademarks used in Canada, is therefore quite unusual. However, the facts of the case are also unique.

Many Canadians will recognize the name Trader Joe’s. This grocery store chain, which operates exclusively in the U.S., has carved out a niche for itself as a purveyor of high quality fresh foods. A majority of the products sold in Trader Joe’s stores are branded with Trader Joe’s’ U.S.-registered trademarks. The company has no stores in Canada. It may have contemplated a possible expansion north of the border; in 2010 it took steps to register two of its trademarks in Canada. However, these registrations have not been perfected – quite probably because the company has not started to use the marks in Canada.

The defendant Hallatt is a Canadian citizen living in British Columbia who also has permanent resident status in the United States. In 2011 employees of a Trader Joe’s store in Washington State noticed that Hallatt was making several large purchases per week. It transpired that he was driving the purchased goods across the Canada/U.S. border in order to sell them in Canada. He later opened a store in Vancouver for this purpose. Originally called Transilvania Trading, he changed its name to Pirate Joe’s.He sold Trader Joe’s labelled merchandise at this store at prices considerably higher than in the U.S. After Trader Joe’s took steps to limit Hallatt’s access to their stores, he began to wear disguises to make his purchases. There was also some evidence that he hired people to purchase goods from Trader Joe’s that he could then bring into Canada. The court also found that he used a store sign that resembled Trader Joe’s’, and that the trade dress of his store also resembled that of the plaintiff company.

Trader Joe’s objected to this use of their trademarks and trade dress in Canada. They alleged that it could cause confusion among Canadian consumers who were familiar with the U.S. brand, and that the defendant’s activities might harm their trademarks because they had lost the ability to maintain their strict controls over product quality and freshness. They alleged that they had already received one complaint from a customer who had been made ill after eating Trader Joe’s food from Pirate Joe’s in Canada. They were also concerned about harm to their reputation because the food sold at Pirate Joe’s was overpriced and because the customer service did not meet their standards. Since Canadians would also cross the border and shop at Trader Joe’s stores in the U.S., harm to the store’s reputation from Pirate Joe’s activities in Canada could have an effect on the U.S.-based business.

The complex set of cross-border factors in this case motivated the Court to find that Hallatt had violated the Lanham Act. In the first place, they found that the “use in commerce” requirement of the Lanham Act had been met. Normally, where there is extraterritorial application of the Lanham Act, the plaintiff has to show that goods sold outside of the U.S. have made their way back into U.S. markets in order to show use in commerce. This was not the case here. However, the court was prepared to find that there was nevertheless an impact on U.S. commerce from the sale of the goods in Canada. This flowed from the potential reputational harm from the sale of products of compromised quality and from selling the goods at inflated prices. The court noted that Canadians were regular customers at the Trader Joe’s stores in northern Washington State (40% of credit card transactions at the Bellingham store were by non-residents of the U.S.). These customers might be confused by the sale of Trader Joe’s products in Canada, and might form a negative opinion of the company if the goods sold in Canada were overpriced or of inferior quality. The Court also found other links to the United States that could be used to ground a decision to apply the Lanham Act extraterritorially. The defendant travelled to the U.S. to purchase the goods and/or hired people based in the U.S. to purchase them for him.It also found that his activities might have been assisted to some extent by his landed immigrant status in the U.S.

International comity is a relevant consideration in deciding on extraterritorial application of a country’s laws. The idea is to interfere as little as possible with the sovereignty of another state. In this case, the court noted that there was no ongoing litigation in Canada over trademark issues on the same facts. It also noted that both parties in this case had ties to the United States; the defendant through his landed immigrant status.The Court also found that “an essential part” of Hallatt’s commercial venture took place in the U.S. Perhaps most importantly, the Court found that it was in a position to order the remedies sought by Trader Joe’s. The defendant had assets in the United States so that an award of damages could be enforced in the U.S. against those assets. A court in the U.S. could also order an injunction to stop Hallatt’s activities in purchasing the goods in the U.S. for export to Canada.

The particular facts of this case were clearly a central factor in the court’s decision to apply the Lanham Act extraterritorially. In this sense, then, the case does not signal a shift that would see U.S. courts hearing a flood of trademark infringement suits relating to U.S.-registered trademarks that happen to be used in Canada. Without the substantial links to the U.S. – and the deliberate attempt to trade on the goodwill of the U.S.-based company, the court would likely not have extended U.S. law in this case. Nevertheless, it is a warning to Canadian entrepreneurs that the exploitation of well-known U.S. trademarks, even if not registered in Canada, could, in the right circumstances, expose them to liability on either side of the border.

I’m pleased to say that after many years of hard work, my co-authored book with Stephen Coughlan, Robert Currie and Hugh Kindred has just been published by Irwin Law.The book, titled Law Beyond Borders: Extraterritorial Jurisdiction in an Age of Globalization, explores the reach of law beyond state borders from a Canadian perspective. We examine the scope of the legal and practical power of Canada to assert (and to respond to) foreign assertions of extraterritorial jurisdiction. We also develop an analytical framework to guide both law and policy makers faced with the issue of whether to act extraterritorially.

Our book begins with a consideration of the twin forces of globalization and technological change, and the way in which both forces have led to a significant increase in the number of instances in which states may feel the need to act extraterritorially. We also consider how these forces have also undermined the Westphalian notion of exclusive territorial sovereignty. We then review the status quo regarding state jurisdiction both in Canada and internationally, before articulating an important distinction between extraterritoriality, and extended territoriality. Particular consideration is given in this respect to the context of the Internet. The book then poses the question as to when it is appropriate for a state to act extraterritorially. Seven case studies are offered, including the application of human rights law, accountability for human rights abuses, transnational data protection, international terrorism, child sex tourism, internet gambling, and virtual worlds. The book concludes with an articulation of our analytical framework.

The globalized and decentralized Internet has become the new locus for a wide range of human activity, including commerce, crime, communications and cultural production.Activities which were once at the core of domestic jurisdiction have moved onto the Internet, and in doing so, have presented numerous challenges to the ability of states to exercise jurisdiction. In writing about these challenges, some scholars have characterized the Internet as a separate “space” and many refer to state jurisdiction over Internet activities as “extraterritorial”. Rob Currie and I have recently published an article in the Georgetown Journal of International Law that explores these challenges in the context of the overall international law of jurisdiction, rather than focusing on any one substantive area. We argue that while the Internet may push at the boundaries of traditional principles of jurisdiction in public international law, it has not supplanted them. We explore the principles of jurisdiction, including the evolving concept of “qualified territoriality”, and demonstrate how they continue to apply in the Internet context. We also examine how states exercise their authority with respect to Internet activities by addressing governance issues, by engaging in normative ordering for the Internet, and by extending the reach of their domestic laws to capture Internet-based activities.The article concludes by offering a set of “first principles,” in the form of policy precepts, to guide the evolution of public international law norms and to address problems particular to the context of the global Internet. You can find it here: http://gjil.org/wp-content/uploads/archives/42.4/zsx00411001017.PDF.

Both globalization and the rapid development of communications technology have created an environment in which a very wide range of human activity can no longer be exclusively confined within the boundaries of any one state. Transborder commerce, communications, and crime are ubiquitous. The global movement of labour and capital, combined with widespread attempts to harmonize national laws to international standards also contribute to an environment in which the role of the nation state is greatly altered. As a result, the extent to which states can exercise jurisdiction over matters that take place outside their borders has become increasingly dynamic and controversial under international law. The goal of the project is to critically examine the use of extra-territorial jurisdiction by states and to formulate an analytical framework to help Canadian law and policy makers in making principled decisions on the issue.

My own work on this project has focussed on internet and privacy issues. A new paper exploring extraterritoriality in the context of the internet, co-authored with Robert Currie will be forthcoming shortly in the Georgetown Journal of International Law.

This SSHRC funded research project is being carried out with Stephen Coughlan, Robert Currie and Hugh Kindred of Dalhousie University.